One on One: Cac’s Jim Facette

by Contributing Editor On Aug 27, 2007

In Canada, major airports are operated under lease by local authorities via the federal government, while smaller facilities are locally owned and operated. For the majors, the rent they pay to the feds remains a point of contention. At the same time, the air traffic control system, privatized in the 1990s, is in the midst of modernizing with a nationwide ADS-B system, something the FAA in the U.S. is trying to get moving in Congress. Yet, despite that advance in technology, airports are calling for more technological advances in their operations. To discuss the issues facing Canadian aiports, AIRPORT BUSINESS recently interviewed Jim Facette, president/CEO of the Canadian Airports Council.

Facette has developed and led several lobby campaigns in Canada, and represented industry on boards and committees, including as a director for the Transportation Association of Canada. He currently is a member of the new President’s Advisory Council of the Canada Border Services Agency.
Following are edited excerpts of our recent interview with Facette ...

AIRPORT BUSINESS: What is the status of rent relief for Canada’s major airports?

Facette: Any money, for whatever purpose including debt servicing, is by Transport Canada’s definition considered revenue. It goes beyond the generally accepted accounting principles (GAAP), where for example revenue [related to] debt servicing is not considered revenue under GAAP. That needs to be changed.

The new formula brought forward in May, 2005 did have a real impact at reducing airport rent paid by airports in Canada. The new formula, though, does continue to take out more money out of the system just from that one piece of the revenue formula.

Toronto has not signed onto the new deal. Under the current formula, Toronto pays about $144 million in rent to Ottawa, which represents the better part of 45 percent of the amount of money that Ottawa is expected to collect in FY2007-2008. Transport Canada has booked $280 million.

AB: Interestingly, Toronto ran a campaign with passengers recently to get them to petition the federal government for airport rent relief. Any thoughts on that initiative?

Facette: CAC supported that. It was done leading up to the federal budget that took place in March; nothing happened.

What we’re saying now is, you need to not just look at rent in isolation. We’re not asking for a handout. What we’re really talking about here is the ability for airports in Canada to compete on a worldwide scale.

Toronto handles 31 million passengers a year, and is positioning itself to compete globally for international traffic. It’s going to compete with Chicago; JFK; and other like airports. When an international carrier lands at one of those American airports, they’re landing at an airport that has not undergone the same business reality that Canada has had to. American airports are subsidized; ours are not.

If we’re going to compete on a level playing field, we need to get some cost certainty built into the system. Reducing airport rent will go a long way to doing that. The economic payback to the federal government is through economic activity, be it job creation, more flights, more business activity, more visibility to get more people to come to Canada. There’s a net gain, in fact, in the long term.

We have to take a step back and look at it from a competitive perspective. Toronto’s in a competitive marketplace; Buffalo is just down the road. We’re competing for cargo and passenger traffic. Look at Atlanta, Miami.

AB: Are you optimistic?

Facette: We continue to believe that the door is not closed, and that more dialog is required. We’ll continue that dialog; we’ll continue to present it as a business-competitive issue.

AB: In the U.S. the Registered Traveler program seems to be getting some traction. Where are you at with a similar program in Canada?

Facette: We in the airport industry in Canada have long said that we have the technology available. We have other trusted traveler programs, like Nexus and CanPass [for reentry into Canada], that operate on a bi-national basis between Canada and the United States.

If we have one for those, why do we not have some sort of trusted traveler program for domestic flights in Canada? Transport Canada, the regulator at this point, has indicated to us that it’s not ready. It perceives, in our view, that any use in new technologies would be perceived as a decline in the screening process of passengers. We contend that in fact the technology exists to enhance the screening of passengers boarding airplanes, and at the same time be able to reduce the hassle factor of CATSA [Canadian Air Transportation Security Authority] lines. We remain hopeful.

Airports see it as a service to the passengers. Airports are in the experience business. Given the corporate structure here in Canada as not-for-profit corporate entities with a customer service focus, anything an airport in Canada can do — obviously, airports in the U.S. have picked up on the notion — to provide passengers with a more pleasant experience, we’re happy to do it.

AB: The current Airports Capital Assistance Program budgets $33 million for 28 infrastructure projects in Canada. What’s your perspective on small airport funding?

Facette: It’s very different here in Canada. Airports in Canada, since they have been devolved to local not-for-profit airport authorities 15 years ago, have invested $9 billion in upgrading airports across Canada. That money was derived from the debt markets, or other ways.

We don’t ask the federal government for money for capital projects. The ACAP program is meant for airports that are not formally mentioned as being part of the national airport system in Canada. It’s meant for safety-oriented projects specifically. Typically, it’s for smaller regional airports
Each airport in Canada determines its own needs based on their projected traffic volume, whether you’re St. John’s, Newfoundland, or Toronto.

AB: You do have your Airport Improvement Fee.

Facette: Each airport sets its own fee, which is not regulated, not set, in any way by the federal government. It’s set typically in consultation with the airlines. That AIF money can only be spent on capital projects. Currently, the AIF at most airports is in the $15 range.

AB: Are there any particular funding sources available outside the AIF?

Facette: The only place we’re allowed to go is the debt market, other than borrow money from the bank. There are five key sources of revenue that airports have: AIF; aeronautical fees; commercial agreements with concessionaires; commercial opportunities that they can maximize from their property development; and, parking.

There are some airports, particularly Vancouver, that have companies at arm’s length that provide income. YVRAS Airport Services is a holding company that provides revenue back to the airport authority. It is a for-profit holding company; it pays taxes.

AB: What’s the status of Safety Management System incorporation at Canada’s airports?

Facette: It’s gone to the regulatory stage; we’re a little further than the U.S. Our regulations have been published and are out there for comment. SMS is quite advanced up here; there are still some challenges.